Midday Commentary: Spreads flat in front of supply; Apple firms; Wells Fargo softer

By Cristal Cody

Tupelo, Miss., June 2 - Monday's primary session in the investment-grade bond market is expected to be active with several deals set to price later in the day, according to sources.

The market absorbed more than $13 billion of issuance in the previous week and more than $100 billion of supply in May.

"The pace of supply has been steady in 2014 as monthly investment grade issuance has come in between $95 million and $130 [million] in each of the first five months of the year," RBC Capital Markets, LLC analysts said in a note. "The backdrop is supportive of this trend continuing as government bond yields and credit spreads are at the bottom of the recent ranges. Through the end of May, U.S. investment grade issuance is running 1% ahead of last year's record pace."

High-grade bond spreads remained stable early Monday, according to market sources.

The Markit CDX North American Investment Grade series 22 index was unchanged on Friday at a spread of 62 basis points.

Market participants are mostly focused this week on the Labor Department's May jobs report due on Friday, sources said.

In the secondary market, Apple Inc.'s 3.45% notes due 2024 priced in April are trading stronger, a source said.

Wells Fargo & Co.'s 4.1% subordinated notes due 2026 brought a week ago traded flat to 1 bp wider, according to a market source.

Apple firms

Apple's 3.45% notes due 2024 are trading about 10 bps better at 70 bps offered, a source said early Monday.

The notes (Aa1/AA+/) rose to 102.96 in midday trading from 102.38 on Friday, according to a market source.

The company sold $2.5 billion of the 10-year notes at 99.916 to yield 3.46%, or a spread of Treasuries plus 77 bps, on April 29.

The computer and mobile communications device company is based in Cupertino, Calif.

Wells Fargo mostly flat

Wells Fargo's 4.1% subordinated notes due 2026 traded flat to 1 bp wider at 152 bps offered, according to a market source.

The bank (A2/A+/AA-) sold the 12-year notes on May 27 at a spread of Treasuries plus 160 bps.

Wells Fargo is based in San Francisco.

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